Here is my best guess: We show up at the intersection and we listen to lawyers, judges, regulators and vendors talk about the issues of the day. Alas, this is not original to me. It is the "soak and poke" research method pioneered by the renowned political scientist, Richard Fenno (photo to right). See Fenno, U.S. House Members in Their Constituencies: An Exploration, 71 Am. Polit. Sci. Rev. 883, 884 (1977) (seminal article that describes the "soaking and poking" methodology as one that "befits the earliest stages of exploration and mapping") (HT to my PhD colleague Jay Krishnan, who explained this all to me).

Earlier this month, there was a major conference in
Washington, DC on developments in the world of electronic discovery --
the very thing that has added enormous cost and complexity to civil
litigation in this country, impacting access to justice, and producing a
restructuring of how corporations buy and manage a significant portion
of their legal services. If there
is a burgeoning legal technology revolution, the frontline is the world
of e-discovery. Lawyers and clients can no longer cope with the rapidly growing
volume of electronically stored information (ESI). Going forward, technology and nonlegal expertise are a permanent part of the legal industry.

This major conference was organized by the Advanced eDiscovery Institute, which is part of Georgetown Law's CLE operations. According to its website, the conference (now it its ninth year) has "gained a reputation among judges,
practitioners, and vendors as the leading eDiscovery conference of its
kind in the United States." Notice that "law professors" and "legal educators" are entirely absence from this description.

If you leaf through the lengthy roster of speakers and organizers, you'll see:

A dozen federal judges, including the busiest and most influential district courts (SDNY, ND Illinois, SD Texas, District of Columbia)

Lawyers from the FTC, DOJ, SEC, and US Commodity Futures Trading Commission

This is a very serious crowd. Yet, I located only one full-time law professor in the mix: John Carroll, who is Dean of the Cumberland School of Law at Samford University. Yet, even Dean Carroll is not your typical legal academic. He is a Vietnam veteran, a 1974 graduate of Cumberland Law, a former federal magistrate judge, and a current member of the Sedona Conference. Kudos to Dean Carroll, whom I suspect knows quite a bit about cutting edge issues in eDiscovery. But where is the next generation of legal academics soaking up all this valuable institutional knowledge?

Nearly 10 years ago I showed up at the Indiana Solo & Small Firm Conference. I was there to gain some basic insight for a course I was putting together called "The Law Firm as a Business Organization." As the organizers will tell you, a law professor had never before ventured into their conference. What was their reaction? A very kind, "It's about time!" I was immediately drafted onto the organizing committee and in subsequent years conducted two major surveys for the ISBA Solo & Small Firm Section. To this day, the lawyers I met at that first Solo & Small Firm Conference remain an important part of my professional network. Ironically, several years ago the small firm crowd was issuing a clarion call on the importance of law and technology -- for them, it was all about survival.

Now law and technology is on nearly everyone's radar. New tools and work processes are opening the door to better, faster, and cheaper legal solutions -- solutions that bear little resemblance to the artisan method of lawyering taught in US law schools. Unfortunately, there are no classes to turn any of us into experts--the practicing bar itself is struggling to comprehend the implications of the new world we are entering. During a paradigm shift, the job of academics is going to messy and chaotic. At this juncture, we have to educate ourselves by showing up, talking to people, and observing. Cf. Susan Helper, Economists and Field Research: "You Can Learn A Lot Just by Watching", 90 Am. Econ. Rev. 228 (2000). It is time to get to work.

Interested in a primer on law and technology? Consider the NYC LegalTech, which runs from Jan 29-31. Early bird registration ends Dec 31, 2012. I will definitely be at ReInvent Law Silicon Valley 2013, which is March 8 at the Computer History Museum. Other high quality options -- I am told by people more knowledgable than me-- are the ABA Techshow, which runs from April 4-6 in Chicago this year, and the International Legal Technology Association annual conference, which runs August 18-22 in Las Vegas this year. I would love to get together with other law professors who will be attending these important industry meetings.

DennisKennedy.com, a blog writen by Dennis Kennedy, a lawyer and legal technology expert. Dennis has a strong following among individual lawyers to want to leverage technology to improve their practice.

Strategic Legal Technology, a blog written by consultant Ron Friedmann, a brilliant and generous person with 30 years of experience and perspective. Ron was there at the genesis of law and technology. At some point, I hope his career is written up. Ron is a guru on knowledge management and enterprise-level technology.

Law Technology News, a great electronic resource edited by Monica Bay. LTN is part of American Lawyer Media. I predict that LTN is going to go mainstream rather than niche in the very near future.

Computational Legal Studies, which is a blog founded by Professor Dan Katz at Michigan State. Dan is preparing for a whole new way of conceptualizing legal problems and legal practice.

Law21, a blog written by lawyer, journalist, and consultant Jordan Furlong. Tech is a common theme for Jordan. He is a great translator who puts things into a broader perspective.

My colleague, Carter Bishop (left), just sent over some comments by a friend of The Legal Whiteboard, Paul Lippe (below right). Among other things, Paul contributes to The New Normal blog for the ABA Journal. Much of the discussion over there centers around the current upheaval in the way sophisticated users of legal services (mostly big companies) interact with their suppliers (mostly big law firms).

Carter's e-mail concerns comments from Jeffrey Carr, the GC of FMC Technologies to this effect: outside lawyers do four primary things: Advocacy, Counseling, Content, and Process. The first two have relatively high value, and lawyers are pretty good at it. The second two are the kinds of things that don't, on their surface, seem to have much value to the client, like legal research or document preparation, and which, in the New Normal, are getting outsourced to places like Wheeling, West Virginia and Bangalore, India.

Notwithstanding the fact that I was thoroughly inculcated in the New Normal twenty years ago, I was intrigued by Paul's very recent observation to the effect that lawyers still resist the jargon of Six Sigma and lean enterprise, that "this 'industrial' language is anathema to many lawyers, even though nobody seems to substantively rebut the New Normal analysis." (Well over twenty years ago, the then-GC of Motorola, Richard Wiese, came to talk to my law firm about Six Sigma, and he got precisely the same reaction from a good number of my partners.)

Anyway, Carter asked what I thought, and he may have been surprised. I think one aspect of the fundamental truth that "Lawyers Are Not Special" is that companies can't simply beat the crap out of law firms (in the long run) any more than they can beat the crap out of other suppliers. Here's what I noted:

1. What has facilitated the "New Normal" is the migration of smart lawyers into corporate management, and the resulting syncretism of business like value propositions into the market for legal services. That's a reflection of lean business management philosophy generally, which is that we develop entitlements or expectations of value and productivity to be derived by any investment of resources, whether the investment is money, time, property. Value is what the user is willing to pay. Productivity is the ability to produce output (value) with the fewest possible inputs. When I was in the business world, the mantra was "growth and productivity." That is, you made money by expanding the reach of your value proposition (growth) and adopting the best possible cost position (productivity).

2. The New Normal purchasers are better able to distinguish, or unbundle, those aspects of legal work that have high value propositions. I do think the long term/short term distinction is meaningful. When I was full bore hard charging toward a business objective, I at least had the capability of hearing what the lawyers were describing as the long term risks. I didn't always take their advice because I was in a better position to balance long term and short term (for example, as a seller, I would not generally not want to let a debate over the caps, baskets, and limits of the indemnification provisions to the buyer take dollars off the purchase price). But getting sophisticated legal advice is more complex than it looks. People like David Katz at Wachtell or Peter Atkins at Skadden, whose M&A advice is probably worth well more than whatever they charge per hour, or Steve Newborn at Weil or Helene Jaffe at Proskauer, whose antitrust/merger analysis is the same (to name several whose advice I've valued or counseling I've admired), don't just pop into existence. The infrastructure of the firm creates people like that. So costing is more nuanced than just saying "I only want to pay for Katz's or Atkins's time."

3. In business, sophisticated purchasers want their suppliers in the supply chain to be profitable. For example, auto parts manufacturers need stampers to provide steel stampings. You can put enough price pressure on a stamper, even an efficient one, to drive it out of business. The trick is to design the supply chain so that the stamper makes what you need at a price appropriately reflecting its value to you, and productively enough to make a fair profit. What you do is work with the supplier to remove the non-value added stuff to the extent you can. If we can reduce the material cost on that stamping by engineering it in a different way, the price AND cost go down.

4. That's pretty much what you are seeing in the market for legal services. It seems to me the appropriate balance is when I, as GC, say to the Big Law firm - this is about how much I'm willing to pay for the deal, given that I need a mix of high value and low value services, and when the Big Law partner says that I'm going to charge you for the low value stuff to the extent necessary to allow the firm to continue to produce the high value stuff. It's a decent position on the law firm partner's side to say to a buyer - I'll strip as much out and send it to West Virginia or India as I can, but it's a legitimate part of my overhead to charge you for some training, because my value to you is actually about $50,000 an hour (or something like that - I just made the number up).

5. So my working philosophy as a GC was to be smart, not to be doctrinaire: to push when I thought it made sense to push, but also to back off and be responsive to the long term health of my best suppliers.

Early this morning Bloomington, Indiana got the upper estimate of snow predicted by the National Weather Service -- roughtly a foot of very wet, heavy snow. So I did the prudent thing: I started shoveling before my driveway froze into something akin to glacial ice when the temperature drops later today. (My youth in Cleveland prepared me well for snow storms.)

(photo credit: Mary Henderson)

Of course, my motives were not pure. I was anxious for a legitimate excuse not to grade exams.

(Henderson dining room, Dec 26, 2012; photo credit: Bill Henderson)

I hope to find other more pleasant ways to procrastigrade before Jan 1, which is my scheduled completion date.

The American Bar Foundation (ABF) invites scholars to join our intellectual community for the 2013-2014 academic year. We encourage national and international scholars on leave or sabbatical to take advantage of our diverse community and excellent facilities. We offer an office, telephone, and computer, but no stipend.

Preference will be given to visitors whose scholarship coincides with the research agenda of the ABF, and who will be in residence full-time for all or part of the year. Summer visits are possible. Visitors are expected to participate in the intellectual life of the ABF, including a weekly seminar.

If you have an interest in this opportunity, please send an email to Jothie Rajah at jrajah@abfn.org, Subject Line: Visiting Scholars Program, which states (1) the topic on which you are working, (2) the preferred dates for residence, (3) the days each week you would expect to be at the ABF, and (4) attach a CV. Applications should be received by April 1, 2013. Applications will be considered as space allows. The ABF Appointments Committee will review applications and prospective visitors will be notified accordingly.

A colleague passed along a link to a thought-provoking blog post by Dr. Andrew Clark, a veterinary doctor who runs a consulting practice on the business of veterinary medicine. His business gives him a bird's eye view of the forces roiling the industry.

Suffice to say, what is happening in the veterinary education, and the broader vet industry, is eerily close to the problems in legal education and the legal profession.

If you follow my blog or have worked with me, you already know that
one of my favorite sayings is “our best thinking got us here.” That is
certainly the case with the Veterinary Student Debt situation. We need
some new thinking regarding what generates student debt and what hampers
the ability of students to pay back the debt.

In the course of my management consulting business, I am fortunate to
work at the interaction intersection between Veterinarians, Veterinary
practices, Veterinary Colleges, Veterinary Students and Businesses that
provide services and products to the veterinary profession. One of the
most common and sincere concerns expressed by people in all of the
groups is concern over the impact of student debt on the profession. The
student debt situation is a circular process involving Veterinary
students, Veterinary colleges, the AVMA, lenders and Veterinary
Practices (employers).

I don’t have a solution to the problem but I have some observations
and ideas that could be woven into the fabric of a different strategy
for financing veterinary education. Although it may happen, my intent is
not to offend everyone in the entire veterinary profession with one
blog but rather to stimulate creativity and innovation.

Veterinary Compensation

Because the most common theme in discussions involving student debt is
“Veterinary jobs should pay more,” I will enter the circle at the
Veterinary Practice (employers) point. The assumption seems to be that
every Veterinary business is profitable enough to pay whatever is
necessary to cover student loans. When graduate Veterinarians enter the
workforce a huge majority become employed by small businesses. No amount
of marketing, posturing, denial or wishful thinking will change the
fact that small businesses success or failure is driven by supply and
demand.

From my position in the industry, in the economy in which we all
work, the demand for veterinary services appears smaller than the
supply of veterinarians. I routinely look at the financial statements of
over 50 veterinary practices; equine, mixed and companion animal. Those
financial statements demonstrate that practices do not generate enough
profit to pay Veterinarians sufficiently to repay student loans under
the repayment terms commonly available. That is a remarkably bad
situation since the successful transfer of the Veterinary Profession
from one generation to another is dependent upon the next generation
being solvent and content.

Many practices are changing management
practices to become profitable. That will help when practices generate
enough earnings to add higher veterinary compensation to the cost
structure of the business and remain solvent. Clearly compensation is
not a realistic short term ‘fix’ until supply and demand for veterinary
services shifts back to favor the Veterinarian.

Lenders ...

Lenders are rightfully concerned about security when they loan anyone
money including students. Bankruptcy on student loans used to be a big
loss for lenders. However, under the new regulations, student loans
cannot be discharged by bankruptcy so there is significantly less risk
now. [I wonder if the veterinary industry has its own Matt Leichter.]

Veterinary Colleges

When the dust all settles, Veterinary Colleges are in the business of
selling Veterinary Medical Degrees to students who buy a degree with the
intention of using it to make a living. In the age of austerity,
Veterinary colleges have faced massive budget cuts. One response has
been to increase class size, generating tuition revenue for the school.
In effect, the colleges are generating more customers for their product
and increasing the supply of veterinarians.

From my perspective and
experience, the veterinary profession is upside down as far as supply
and demand goes. We have inadequate demand for Veterinary services to
support the number of veterinarians in practice. Increasing class size
diminishes the earning potential and therefore the value of a Veterinary
Medical degree yet the cost of the degree continues to escalate. That
strategy only works for schools because student loans are easy to
acquire and young consumers following their life’s dream are still
willing to borrow the money to purchase the degree at an ever higher
price with challenging terms. ...

AVMA Accreditation

It is difficult for me, a person working in ‘the business trenches’ of
veterinary medicine, to understand the timing of the AVMA’s decision to
accredit more schools. This clearly increases supply of veterinarians in
the face of decreasing demand for veterinary services thereby reducing
the value of a veterinary degree and the earning power of a
veterinarian, both of which contribute to student debt management
challenges.

Another component of accreditation that is an integral part of the
challenge of rising student debt is the requirement to have a research
program in order for a school to be accredited by the AVMA. The paradigm
that effective teaching of veterinary students requires faculty
involved in a research programs has never been assessed to be of
measurable benefit to student success in general or even specialty
practice.

In general, Assistant, Associate and Full Professor ranked positions
are allotted 50% FTE (Full Time Equivalent) in non-teaching functions
which include research. Who is paying for that 50% of their time? Many
veterinary schools have chosen to hire instructor level individuals that
are nearly 100% FTE in teaching to release higher ranked faculty to do
research. Why are these instructors that do no or very little research
acceptable as educators, when the need for research to enhance education
is the paradigm?

The world is changing around us and we need to have a fresh look at
research program requirements for accrediting schools. It is impossible
to understand how the cost of faculty in 50% FTE positions is not passed
along to the student in the form of tuition fees, etc. That component
of tuition is financed by student debt. ...

Epilog[ue]

This blog is aggregations of realities that I observe in the course of
helping veterinarians manage their businesses and new graduates manage
their debt. Although I am not in a position to resolve these challenges,
I am in a position to share my observations and invite people in policy
making capacities to use some new thinking. After all, our best
thinking got us here. ....

According to this article in Popular Mechanics, virtual lawyers speaking crowdsourced wisdom is one of 110 predictions that will come to pass over the next 110 years. The occasion is the 110th anniversary of this revered magazine. Here is the blurb:

A virtual lawyer will help you plan your estate.
"I don't mean avatars," Cisco's Dave Evans [Cisco's chief futurist] says. "I mean virtual
people—self-contained, thinking organisms indistinguishable from
humans." Sounds crazy, right? But surely you've seen the magic of CGI [Computer Generated Imagery].
What's to say you can't attach a lifelike visage to an interface
fronting the crowdsourced wisdom of the Internet? Give it a nice head of
hair, teach it how to smile, and you're looking at a brilliant legal
eagle with awesome people skills.

If this makes you worried, note that the magazine also predicts annual physicals being done through a cellphone app.

Three years ago, in the depths of the economic recession resulting from the mortgage meltdown, the vast majority of major law firms in the country were engaged in significant restructuring, frequently called “downsizing” or more euphemistically “rightsizing.” This was a regular news item in legal publications such as The American Lawyer and on blogs. Each week brought news of a few or several major law firms that were planning to cut staff, cut associates or even cut partners. Indeed, some of the major law firms, such as Howrey and Dewey LeBeouf, ultimately didn’t survive the economic downturn.

While the large firm legal marketplace was in turmoil in 2009 and 2010, law school enrollment and tuition continued to climb, even as law school graduates increasingly were having difficulty finding employment. According to the LSAC Volume Summary, in the last two years, as prospective students have become increasingly aware of the challenging employment outlook for law school graduates, and the increasing cost of law school, the number of applicants to law schools has declined by over 20%, from 87,500 to roughly 68,000. According to the ABA, the number of first-year students has declined by over 8000, a decline of 15%. Assuming an average net tuition of $25,000 per student (a rough estimate of average sticker price tuition less a rough estimate of average scholarship) this decline of roughly 8000 in first-year enrollment means law schools probably are missing roughly $200 million in first-year revenue for the 2012-2013 academic year as compared to the 2010-2011 academic year.

Of course, just as some law firms were more impacted by the economic downturn in 2009 than other law firms, some law schools are more impacted by the decline in first-year enrollment than other law schools. Comparing school-specific enrollment data between 2010 and 2012 for the 140 law schools which have published enrollment data for their entering class in fall 2012, 59 schools – over 40% of those with available enrollment data – have seen a decline of 20% or more in their first-year enrollment, and 15 of those 59 have seen a decline of 30% or more.

For a hypothetical law school with an entering class of 200 students in 2010, a decline of 20% or more in first-year enrollment means a first-year enrollment in 2012 of 160 students or fewer. Again, assuming $25,000 in net tuition per student, that decline of 40 or more first-year students translates to at least $1 million less in first-year revenue in 2012 than in 2010. If the hypothetical law school has seen a decline of 30% or more, that would mean a decline of 60 or more first-year students that translates to at least $1.5 million less in first-year revenue in 2012 than in 2010. If similarly smaller classes are enrolled in 2013 and 2014, this hypothetical law school will be receiving $3 million to $5 million less in revenue in 2014 than it received in 2010.

There are 59 law schools with a decline in first-year enrollment between 2010 and 2012 of at least 20%, 15 of which have seen a decline of 30% or more. With that many law schools feeling significant revenue pressure, one might think we would be hearing regular news stories about layoffs or restructuring or downsizing or rightsizing among law schools, comparable to what we heard about major law firms in 2009-2010. But since the start of 2012, there have been only two news stories on law school layoffs or restructuring -- one in spring of 2012 when the University of California-Hastings School of Law announced that it would shrink its class by 20% and layoff over a dozen staff members (while increasing tuition), and more recently, when the National Law Journal published a story about budget-cutting at Vermont Law School. Notably, neither of these two law schools are among the 59 that have seen a decline of 20% or more in first-year enrollment between 2010 and 2012, as Hastings enrollment is down roughly 17% between 2010 and 2012 and Vermont enrollment is down roughly 18% between 2010 and 2012.

Law schools presently are going through the same revenue shortfalls law firms went through in 2009 and 2010. Enrollment is down significantly and revenue has declined significantly. Law schools have to be engaged in restructuring – in downsizing or rightsizing. My colleague, Mark Osler, engaged in a thought-exercise about how law schools might do this a couple of months ago on the Law School Innovation blog. But almost no one is reporting on what is actually happening at the dozens of law schools trying to deal with significant budgetary distress.

In the coming months or in the next year or two, law schools will be leaner – with fewer staff and possibly fewer faculty (if early retirement options are put on the table or if untenured faculty are released). And quite possibly, some law schools may close. While a law school being forced to close likely will be news, it appears that law school restructuring generally is less newsworthy than law firm restructuring.

As a result, we are experiencing a stealth restructuring in legal education. Please don’t tell anyone.

I have been reading about predictive coding for a few months now, and that is my conclusion. Predictive coding is the use of computer algorithms and machine learning to conduct the review of electronically stored information (ESI). For a useful primer, see Frederick Kopec, Predictive Coding in eDiscovery or Predictive Coding for Dummies (remarkably, there are two editions, one by Symantec and the other by Recommind, see Legal Tech Insider, A Tale of Two Predictive Coding Books).

From the client perspective, predictive coding is at least as good as first-level human review (typically junior attorneys screening for relevance and privilege) but dramatically less expensive. And note, whatever efficiency and accuracy benefits predictive coding has today, it will only improve in the months and years to come. It contrast, our processing capacity as humans is, well, static.

The big players in the space are Kroll Ontrack and Recommind. These are not insignificant companies. Kroll Ontrack started as a hard disk
recovery service and evolved into the e-discovery and information management
services. It now employs 1,500 workers in eleven U.S.
and nineteen foreign locations around the world. In 2010, Kroll Ontrack had revenues of $250
million. A few layers up, it is owned by the Private Equity giant Providence Equity Partners.

Recommind has approximately $15 million in
annual revenues and approximately 100 employees spread over facilities in
Massachusetts, California, London, Germany, and Australia. According to this June 2012 story at the CIO Agenda at Computer Business Review, Recommind is gearing up to go public.

Howard Sklar, Senior Corporate Counsel for Recommind, just posted an essay entitled, Legal Acceptance of Predictive Coding: A Journey in Three Parts. The parts are: (1) acceptance that predictive coding reasonable, (2) arguments that it is better and thus must be used in this case, (3) sua sponte judicial order that it be used. The fourth part, still to come argues Sklar, is a state bar ethics watchdog issuing a ruling that failure to use predictive coding is unethical.

Here is an excerpt from Sklar's post:

There’s a certain trajectory for technology adoption. Early
adopters, mainstream acceptance, laggards. But, slow or fast, adoption
occurs. The law is the same way, in its own fashion. But the legal
acceptance of predictive coding
has had a path that’s unorthodox. From the legal perspective,
predictive coding has gone through three cycles, not entirely as
expected.

In cycle one, companies began using predictive coding. The
efficiencies are compelling. Better end results in less time at a cost
savings. An ability to better find and understand the facts
embedded—sometimes hidden—in your documents. These things are crucial
in today’s corporate world. Law firms were slower, but generally
followed their clients into predictive coding, and soon saw the benefits
first hand.

Other vendors—usually the first to adopt new technology—were
laggards. They fought the adoption of predictive coding as long as they
could, mainly because they didn’t have the capability to do it
themselves. Eighteen months ago, the most frequent question I would get
at conferences was “has there been a court case approving the use of
predictive coding?” In the “ridicule it and it will go away” marketing
approach, they were hoping to scare corporations and law firms away from
the benefits corporations could achieve.

Then came Da Silva Moore and Global Aerospace [which, against the objections of one of the litigants, ruled that predictive coding was a judicially reasonable method of conducting discovery.] ...

During this period, other vendors stopped criticizing predictive
coding and started marketing it—sometimes with the capability, sometimes
without. ...

After waiting for the first decision approving the use of predictive
coding, we went to stage two faster than anyone had thought possible:
not whether you can use predictive coding, but whether you must use it. This was the argument in the Kleen Products
case. The defendants had completed their review, and the plaintiffs’
argued that the review was defective because predictive coding wasn’t
used. Eventually, the parties cooperated to end that dispute, but the
argument had been made. ...

We’re now in stage three: a court has sua sponte ordered the
use predictive coding. And not just any court, the Delaware
Chancellery Court, one of the most important corporate courts in the
nation.

In the future, we’ll enter stage four: the decision by a state bar’s
ethics watchdog that failure to use predictive coding is ethically
questionable, if not unethical. After all, purposefully using a
less-efficient, less accurate, more expensive option is problematic. I
think that’s probably 18 months away. But given how fast we’ve gone
through the first three states, stage four may come next week.

Below is an interview of David Cowen by Monica Bay, editor-in-chief of ALM's Law Technology News.
The topic is Big Data. The interview provides a useful glimpse on how this trend is corporate America is taking hold. It should be of great interest to lawyers because (a) it has enormous economic value, and (b) it raises novel privacy issues. Which will predominate?
[posted by Bill Henderson]